Ascent Meditech Ltd Vs Union of India & Ors. (Gujarat High Court)
In a significant ruling for businesses grappling with Goods and Services Tax (GST) refunds under an inverted duty structure, the Gujarat High Court has set aside a Central Board of Indirect Taxes and Customs (CBIC) circular that limited the applicability of an amended refund formula. The court, in the case of Ascent Meditech Ltd. Vs. Union of India & Ors., declared that the amendment to Rule 89(5) of the Central/Gujarat Goods and Services Tax Rules, 2017, is clarificatory and curative in nature, thus having retrospective effect.
The petitioner, Ascent Meditech Ltd., a manufacturer of orthopedic soft goods, faced a common issue in the GST regime known as an “inverted duty structure.” This occurs when the tax rate on inputs (raw materials and services) is higher than the tax rate on the finished output product. Ascent Meditech’s products were taxed at 5%, while its main inputs attracted GST rates ranging from 12% to 18%, including 18% on input services. This disparity led to an accumulation of unutilized Input Tax Credit (ITC), for which the company sought a refund under Section 54(3) of the GST Act.
The Genesis of the Dispute: Rule 89(5) and its Evolution
